State asks banks, bond houses to pay stamp duty for past 10 years

MUMBAI: This could boil over into a nightmare for banks and bond houses. Opening a new front, the Maharashtra government has asked them to fork out stamp duty on all direct security deals done over the past 10 years.

Stunned by the directive, the financial institutions have sought legal opinion on the matter.

According to market estimates, unpaid stamp duty on direct deals — transactions where no brokerage was involved — during this period could be close to Rs 700-1,000 crore.

In the past, once two banks, or say, a bank and a bond house cut a deal, 'deal confirmation notes' were exchanged by the two parties. The state government has viewed that the deal confirmation note is an agreement that attracts stamp duty.

In deals where a broker acted as an intermediary between the buyer and seller of the security, the stamp duty has been recovered from the broker on the basis of a broker contract between the counter parties and the intermediary. The state government thinks there is no difference between the broker contract and the deal confirmation note. This has been challenged by banks.